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Indian Real Estate News : Delhi NCR
Curbs on realty foreign direct investment below 50% may stay
Source: The Economic Times Oct 09, 2013
The government may reject the urban development ministry's proposal to scrap all restrictions on foreign direct investment below 50% in real estate on the grounds that there can be no exemptions on rules such as minimum area norms.

The suggestion was included in recommendations drawn up by the Department of Industrial Policy and Promotion, part of the Ministry of Commerce and Industry, in order to encourage overseas investment in real estate, which has been hit by a weak economy and high interest rates.

The ministry had also suggested that minimum carpet area be used in place of the prevailing measure of built-up area. "Foreign investment up to 49% should be free from condition to attract foreign capital providers, which do not have long-term interest in construction assets," the urban development ministry had said in July.

"This will also enable real estate players to raise foreign capital at competitive rates and reduce dependency on the already strained domestic financial institutions."

The recommendations are likely to be considered by the Cabinet soon, said an official. Apart from suggesting a cut in the minimum land area required for developing housing plots to 5 hectares from 10 hectares, the proposals said the requirement for apartment complexes should be lowered to a minimum total carpet area of 20,000 sq metres from 50,000 sq metres of built-up area.

The note had also proposed a minimum capitalisation of $5 million, down from $10 million for wholly-owned projects and said the entire amount will have to be brought in within six months of commencement of the project. "The minimum capitalisation requirement is proposed to be reduced to $5 million and made uniform for wholly-owned subsidiaries as well as JVs," the note said.

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